As the pandemic’s health and economic consequences reverberate across the nation, Colorado’s smaller counties, cities and special districts risk losing millions of dollars in federal support that expires at the end of the year.
In Colorado alone, two-thirds of the $275 million set aside for small local governments remained unspent as of Nov. 24. Some local governments have had funding requests rejected by the state, while others hadn’t submitted any requests by mid-November.
Complicating the disbursement of money to small governments — many in rural areas of the state facing economic hardships compounded by the pandemic — is a process some lawmakers and advocates have called confusing and even unfair, with problems stemming from ever-changing federal guidance on how the funds can be spent.
The CARES Act, which Congress passed in March, includes a $150 billion Coronavirus Relief Fund for aid to state and local governments. Direct payments from that fund were made to states and localities with populations greater than 500,000.
The money came with a lot of caveats. The biggest one: Barring an extension from Congress, which looks more and more unlikely, the money must be spent — not just allocated — by the end of the year. Any unspent money from the CARES Act must be returned to the federal government.
Through a May executive order, Gov. Jared Polis allocated most of Colorado’s nearly $1.7 billion from the Coronavirus Relief Fund toward various programs, leaving a small amount for allocation by the General Assembly.
In that order, Polis set aside $275 million of the money for counties and local governments that didn’t receive direct federal funding through the CARES Act. The local governments that qualified for direct payments were Adams County, Arapahoe County, the city and county of Denver, El Paso County and Jefferson County. Those counties were responsible for doling out money to their own municipalities.
The Colorado Department of Local Affairs, or DOLA, set aside 10% of the $275 million for other local governments as a reserve fund for those that faced unique financial challenges, perhaps because they were hit especially hard early on in the pandemic, and wanted to request extra money. The rest of the funding would be divided among cities, counties and special districts.
Local governments didn’t just receive a check with the amount they were designated, though. DOLA set up a reimbursement process through which local governments could submit expenses they thought would be eligible for relief funding. Some examples of qualifying expenses: payroll for public safety workers who responded to pandemic-related needs, eviction prevention programs, utility assistance, and grant programs for small businesses facing financial hardships due to COVID-19.
State workers review those applications and determine whether the expenses qualified, based on U.S. Treasury Department guidelines, before reimbursing them.
Questions over rejected requests for ‘capital expenditures’
DOLA’s reimbursement process has led to some confusion over the type of expenses that qualify for coronavirus relief, said Kevin Bommer, executive director of the Colorado Municipal League, an organization that advocates for cities and towns.
“It took so long, really predominantly (because) of the federal government to get clarity and even then, not great clarity, on types of things that are reimbursable,” Bommer said.
Could a municipality use the money to pay for additional baseball helmets for its children’s league, so players wouldn’t have to risk infection by sharing gear? How about for a partition to improve social distancing between workers?
Neither request passed muster with DOLA’s reviewers, Bommer said, essentially because those projects were determined to have uses extending beyond coronavirus relief and lasting past the end of the year. But Bommer thinks those kinds of rejections are due to a “misreading” on DOLA’s part of Treasury Department guidelines.
While the Treasury says coronavirus relief money can’t be used broadly for economic development projects or unnecessary construction, Bommer believes some kinds of “capital expenditures” should still fit the bill.
“I guess if I’m worried about anything, it’s that (the guidance is) being interpreted so strictly that we’re going to end up with money left on the table … or the money gets sent back to D.C. absent an extension by Congress in the lame-duck session,” Bommer said.
Lawmakers and advocates, including Bommer, acknowledge that DOLA is making a good-faith effort to get the funds out to cities and counties that could use them. But state workers and local leaders are feeling the pressure.
“Challenges with getting the CVRF (Coronavirus Relief Fund) funds out come from the sheer volume of funds ($275 million), local government recipients (445) and the timeline of when funds must be spent (Dec 30),” DOLA spokesperson Brett McPherson told Newsline in an email. “Requests are coming in and moving through our process as quickly as can be possible for staff.”
McPherson added that local governments have their own processes for determining which requests to make and when to make them. For example, some local grant programs for businesses had application deadlines in mid-November or late November, so the cities and counties haven’t been able to make those awards yet.
“Some local governments held back money for late fall or winter to meet surge needs which they are processing now,” McPherson said.
The reimbursement process — rather than a blank check to cities and counties — is necessary because otherwise, the state would be on the hook for expenses if the federal government found they didn’t qualify under the CARES Act. So, DOLA’s process is part of “due diligence,” Bommer said.
Still, the numbers raise some concerns about how long it’s taking to dole out the money. Of the $275 million for small local governments, just $76 million, or about a third of the first round of money, had been paid out by DOLA as of Nov. 24 to reimburse local governments for coronavirus-associated costs, according to McPherson.
As of Nov. 24, another $10.4 million in reimbursement requests were pending review by DOLA, McPherson said.
All together, that adds up to around 35% of the first round of money intended to reduce the virus’ spread and help stop financial bleeding in cities and counties (not including the $27 million reserve fund). McPherson said 16 counties and municipalities and 41 special districts had been reimbursed for all of the money they were allocated by Nov. 24.
Lawmakers and state leaders are still holding out hope for a federal extension of CARES Act benefits.
“I am still hopeful that the federal government will give us more flexibility — not only in that deadline, extending it for us, but giving us flexibility in how those dollars are spent,” Rep. Julie McCluskie, D-Dillon, said.
Counties working independently from state have an easier time accessing funds
Counties that received direct funding from the federal government — and the municipalities within them, which request approval from the county — appear to have an advantage over the smaller counties that have to apply for reimbursement from the state, some people say. Possible factors include greater staffing capabilities, more financial resources to front costs before reimbursement, and less stringent requirements.
“House District 61, I think, is a great microcosm of what is happening,” McCluskie said during a Nov. 20 Joint Budget Committee meeting where legislative staff gave a presentation to lawmakers on federal relief funds.
“Pitkin has spent every cent they were allocated, Summit has overspent, and then I’ve got Lake County, that … doesn’t have a county administrator or manager,” McCluskie, who is vice chair of the JBC, continued. “The frustration is palpable out there, and I am frustrated, because for our larger counties that probably could — Denver and Arapahoe and Adams — easily handle this type of procedure, we’ve got small, even mid-sized rural counties that are so challenged by the process.”
McCluskie later told Newsline that she’d spoken with Rick Garcia, the executive director of DOLA, who said that the department was on track to issue reimbursements to every eligible local government. “That is certainly the goal,” she said, “so I was very pleased to hear that.”
However, in approving reimbursements, “the Department of Local Affairs took a much more strict view” of the types of expenditures that would qualify under Treasury guidelines than did the large counties working independently, Robin Smart, a policy and budget analyst on legislative staff, told lawmakers.
“What we are seeing emerge is a disproportionate support of the counties that got direct allocation, versus the other balance of counties having to overcome additional hurdles in order to get support,” Sen. Kerry Donovan, D-Vail, said at the JBC meeting.
While Bommer has fielded complaints from municipalities in those smaller counties that have to apply through DOLA, he’s not getting the same feedback from people in Adams, Arapahoe, El Paso, Jefferson, or Denver counties.
“Let me put it this way,” he said, when asked whether cities and towns in those larger counties were having an easier time getting relief money. “I have not taken one call from one municipality in any of those (counties that received direct funds) with frustrations or concerns or problems about how their county was dealing with them.”
At the JBC meeting, Donovan called for additional state support to the counties that might not have enough staffing and administrative support to submit the needed documents for reimbursement requests.
“Fully understand that we need to be transparent and make sure that we dot our i’s so there isn’t a clawback (from the federal government), but we can’t have two different recovery mechanisms for counties based on their population,” she said. “That is unfair.”
Concern over what happens to unspent money
While some local governments have had their requests for reimbursement denied, several cities and special districts hadn’t submitted any reimbursement requests for approval at all by mid-November.
At a meeting of the Local Government Coronavirus Relief Fund Committee, which is comprised of DOLA officials plus advocates for cities, counties and special districts, members discussed imposing a deadline of Nov. 20 for local governments to indicate whether they actually planned to apply for reimbursement, and provide some details about those plans.
Pitkin County Commissioner Kelly McNicholas Kury is hoping that having local governments state their intention will free up additional money for DOLA’s reserve fund, the 10% of $275 million set aside for local governments that have exhausted their first round of coronavirus relief but could use more money for additional expenses.
“My concern has always been, you know, let’s maximize the utility of the fund,” McNicholas Kury said. “Let’s make sure it gets in the hands of local jurisdictions who need money to respond to the COVID emergency, and then also figure out good criteria that is both fair but also prioritizes public health when looking at the 10% reserve.”
Pitkin County has already had reimbursement requests approved for the full extent of its $1.52 million CARES Act allocation, she said, and also applied for some of the $27 million reserve that was set aside for governments that needed extra money.
The county’s requests have included funding for housing assistance, new public health personnel and personal protection equipment.
“It’s tricky to know if there’s going to be any of the 90% left over that could go into the reserve, or if DOLA will recommend that anything left over goes back to the state,” McNicholas Kury said.
Part of the problem as the deadline looms, she added, is that some cities and counties want to spend extra money on coronavirus relief, but don’t know if there will be additional reserve funds available from the local governments that haven’t spent all of their initial money.
“Governments have to be willing to put the costs out there up front, whether or not they get reimbursed in the end,” she said. “People might be able to spend additional money to help bring our (COVID-19) case numbers down, but there’s no guarantee that there will be additional CARES money for them to apply through the reserve and get reimbursed.”
There are some ways counties and municipalities could spend money relatively easily before the end of the year, Bommer said. For example, they could donate the money to a statewide grant fund created by the Colorado Restaurant Foundation and designate it specifically for restaurants in their community.
“If the city of Walsenburg requests or decides to allocate $100,000 and send it to the Restaurant Association’s grant fund — designating it only for places in Walsenburg, of course — they can make that expenditure,” Bommer said. “The only thing they have to do is verify to the state that the expenditure was made and that Walsenburg restaurants drew down on it.”
At a recent press conference, Polis indicated that some unspent CARES Act money could be redirected toward the state’s unemployment insurance fund before the end of the year — a move also discussed by lawmakers on the JBC. Current legislation that would direct some unspent CARES Act dollars toward unemployment doesn’t include the funding for local governments, McCluskie said.
McNicholas Kury is hoping that some of the funds that local governments haven’t had reimbursed would be directed toward the reserve first, allowing Pitkin County to help pay for more COVID-19 testing and screening programs.
“I don’t want to leave any of it on the table,” she said.